In a decisive pushback against US demands, Taiwan has categorically rejected President Donald Trump’s administration’s proposal for a “1:1 chip rule,” which would require US companies to source half their semiconductor production domestically to avoid 100% tariffs on imports. The proposal, floated by Commerce Secretary Howard Lutnick in a recent NewsNation interview, aimed to reduce America’s reliance on Taiwan’s chip manufacturing dominance—where TSMC supplies 95% of advanced US-bound chips—but was dismissed by Taiwan’s Vice Premier Cheng Li-chiun as neither discussed nor acceptable in ongoing trade talks. For tech industry leaders, trade policy experts, and investors searching Taiwan rejects Trump 1:1 chip rule, US-Taiwan semiconductor tariffs, or TSMC trade negotiations 2025, this stance—echoed by opposition legislators as “outright plunder”—highlights the growing friction in US-Taiwan relations, potentially complicating efforts to onshore production while risking higher costs for global supply chains. Taiwan, viewing its semiconductor prowess as a “silicon shield” against China, insists on collaborative expansion rather than forced relocation, with TSMC already investing $165 billion in US facilities.
The rejection, confirmed on October 1, 2025, during tariff negotiations in Washington, underscores Beijing’s strategic leverage and could lead to escalated US measures under Section 232 investigations.
The “1:1 Rule” Proposal: A Hardline Push for Reshoring
Lutnick’s comments, made during trade discussions, proposed a “50-50” split: US firms must produce half their chips domestically and half abroad to qualify for tariff exemptions, with non-compliance triggering 100% duties. Trump echoed this in August 2025, accusing Taiwan of “stealing” America’s chip business. The rule ties into broader Trump policies, including tariffs on devices based on chip content and value, aiming to boost US manufacturing amid national security concerns over Taiwan’s vulnerability to Chinese aggression.
Taiwan’s response was swift: Vice Premier Cheng stated, “We did not discuss this issue during this round of talks and would not agree to such conditions,” emphasizing that the 50-50 split “goes against Taiwan-US supply chain cooperation.” Opposition legislator Hsu Yu-chen called it “exploitative,” urging rejection to protect national interests.
| Proposal Element | US Demand | Taiwan’s Stance |
|---|---|---|
| Production Split | 50% US-Made Chips | Not Discussed; Firm Rejection |
| Tariff Incentive | Exemptions for Compliance | Viewed as “Plunder” |
| Security Link | US Protection for Reshoring | “Silicon Shield” Priority |
Strategic Implications: Tensions in US-Taiwan Tech Ties
Taiwan’s chip industry, led by TSMC (market cap over $1 trillion), supplies 95% of advanced US chips, making it indispensable yet a geopolitical flashpoint. The rejection could:
- Escalate Tariffs: Trigger Section 232 probes, imposing duties on electronics based on chip value.
- Strain Supply Chains: Force TSMC’s Arizona expansions ($165 billion committed) but slow global diversification.
- Boost China Ties: Risk Taiwan’s leverage against Beijing, as US pressure weakens its “shield.”
TSMC shares rose 1.2% on October 2, 2025, reflecting market relief, but analysts warn of long-term volatility.
Conclusion: Taiwan’s Defiant Stand on Chip Dominance
Taiwan’s rejection of Trump’s 1:1 chip rule is a bold assertion of sovereignty, prioritizing collaborative growth over coerced reshoring. As trade talks intensify, it could reshape global semiconductors—will exemptions follow, or tariffs bite? The wafers wait.
